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Niall Ferguson
Economy

Expect 'revolution' in US foreign policy under Trump

British historian Niall Ferguson says scale of change still 'underestimated' by most

WASHINGTON -- From immigration to trade, U.S. policy is in for a shake-up when Donald Trump takes office as president next month. But the biggest change, according to British historian Niall Ferguson, will be in how America deals with the rest of the world.

Ferguson, a senior fellow of the Hoover Institution at Stanford University, sat down with the Nikkei Asian Review to discuss what the world can expect from President Trump and an administration that will "change U.S. foreign policy more than any administration has done in our lifetime."

Q: What is the main driver behind the Trump phenomenon?

A: Many people have jumped to the conclusion that populism is mainly about economics because populists focus on immigration, free trade and other similar issues. But there is a very noneconomic cultural component to it. Part of what people are reacting against is not just globalization but multiculturalism and a whole range of other ideas.

The cultural aspects are more important. What makes Trump popular and what made Brexit happen is a cultural backlash which has to do with immigration, but not only with immigration. It actually has to do with a whole complex of liberal ideas that members of the elite really like, cosmopolitan ideas about cultural relativism, feminism, all kinds of different liberal ideas that are profoundly unappealing to middle America, middle England, to people who perhaps didn't go to elite institutions to study and therefore don't feel the same enthusiasm for these ideas.
 
Q: Can you expand on the multicultural issue?

A: If one looks at polling data in the U.K and the U.S., it's very striking how populist voters, people who voted for Brexit or voted for Trump, expressed their dissatisfaction. It isn't just about employment. It isn't just about the economy generally. It's about the perception that, for example, policy has gone too far in giving advantages to minorities. It's about the sense of estrangement between middle America and the elite sissies on the coasts.

I cite often Charles Murray's book "Coming Apart." He argued there was a profound social polarization in America between elite, highly educated groups and a white working-class that felt not just economically but culturally alienated from the Obama presidency. And I think those issues can't be simplified with terms like racism. The reason the slogan "Make America Great Again" resonated with so many people was that they felt America had, in some measure, changed to their disadvantage. The Trump victory represented a relatively spontaneous backlash against this politically correct culture.

Q: Some experts have pointed out that global sentiment today is similar to what it was in the pre-World WarI or pre-WWII periods.

A: We need to avoid drawing comparisons with the 1930s because I don't think they are appropriate. Our economic situation is nothing so bad as in the 1930s, and the kind of movements that we see in Europe and the U.S. are not fascistic. There is a very important distinction to be drawn between populism and fascism. Populism is not militaristic. There are no Brexit supporters or Trump supporters in military uniform marching through the streets of Washington or London.

So we need to go further back in history to find a good analogy. It's much more helpful to look at the period after 1873, when a financial crisis led to a prolonged period of economic stagnation and deflation, which then triggered a populist backlash against free trade, large-scale immigration, powerful financial institutions and corrupt political elites. All of that happened in the 1870s and the 1880s in the U.S. and in Europe, and the resemblances are very close between that period and our own.

Q: What are the differences between now and the 1870s or 1880s?

A: The difference between our time and the late 19th century is that the international system is very different. So it matters a lot if the U.S. decides to turn away from free trade, free migration and international institutions, because since 1945 the international order has been based on a whole series of international institutions that the U.S. basically underwrote.

Populism in the late 19th century led to specific policies, such as tariffs on imports in many countries. It led to restrictions on immigration. For example, the U.S. in 1882 ended Chinese immigration. But it didn't totally change the international order because the international order in the late 19th century was based on empires.

Today, it's different. Populism challenges a whole international system based on collective security, international law, multilateral agreements and supranational agencies. The big question is how far the populist reaction against those things will change the international order and turn it back into something quite 19th century, in which great powers or empires essentially compete with one another through traditional power politics, diplomatic and military methods included.

Q: France and Germany are set to hold important elections in 2017. Do you think the situation is going to get worse?

A: I think "getting worse" is the wrong way to look at it. In many ways, Brexit and Trump were, in fact, improvements on a status quo that was failing. Clearly, things have to change in Europe. The Monetary Union has been a failure. One can't simply carry on pretending that it works, because the result is a permanent economic slump in southern Europe. The migration policy has been a disaster. They can't simply have open borders around the Mediterranean. So those things need to be changed. And I think Brexit may have sent the first of a series of signals to Europe's leaders to change their ways.

In history, nothing lasts forever. And the ideas and institutions of the Cold War have had a remarkably long life, considering that the Cold War ended 25 years ago. We probably need some new ideas at this point. So I think populism is, for all its kind of crudity and vulgarity, it's a healthy challenge to a status quo that was failing.

Q: Market participants welcome the tax cuts and infrastructure spending side of Trump's economic agenda, but they think his anti-free trade and anti-immigration policies will be disastrous for the U.S. economy. What is your view? 

A: We got to be a little cautious here about the Keynesian elements in Trump's policy. I have my doubts about the benefits of deficit-financed infrastructure investment, especially when we're at full employment. As for trade wars, there's no upside there that I can see. If Trump decides to have a trade war with China by slapping on import duties on January 21, it's reasonable to think that the U.S. will suffer more than China.

What I do see though on the upside is a change in sentiment. The business [community] feels suddenly pleasantly surprised by Trump's victory, and they hear they're going to get tax cuts. You begin to see that Trump is generating a kind of mood swing comparable with the Reagan administration's first couple of years. If he can keep building that mood of confidence so that private sector investment goes up, then I think there's a chance we get out of the secular stagnation trap and into higher growth.

Q: Will Trump's foreign policy change how the U.S. acts as a superpower?

A: The scale of the change is still being underestimated by most people. I think this administration is going to change U.S. foreign policy more than any administration has done in our lifetime. Trump is repudiating the foreign policy of every president since Harry Truman. He is going to challenge fundamental assumptions about U.S. foreign policy, for example, that the U.S. should be primarily concerned with the defense of Western Europe and also East Asian allies against Russian aggression. I mean, that is clearly going to be challenged by those elements in the Trump administration that are openly pro-Russian.

Since 1972, the U.S. has basically had a good relationship with the People's Republic of China. I think Trump is challenging the very assumptions on which that good relationship has been based. I think a lot is in play here. It could also destabilize the Asia-Pacific region in ways that Trump's advisers may underestimate. Trump is going to change policy in the Middle East. He's going to get rid of Obama's pro-Iranian, anti-Arab, anti-Israeli strategy and go in exactly the opposite direction.

It will be a revolution in American foreign policy. And this is going to have a whole series of quite massive consequences. I think the very stability of NATO is going to be called into question by the pro-Russian stance of the new administration. I think the East-Asian order could become very disorderly if China reacts to Trump's opening gambits with naval action. This could escalate quite quickly. And if Trump is playing hardball on Taiwan, that plays right into the hands of the more nationalistic elements in Beijing.

Q: So will Trump likely take an isolationist approach in his foreign policy? Would that undermine U.S. power and influence?

A: It's a sort of mistake to call him an isolationist. I don't think those who advise him are isolationist at all. The key issue here is does Trump make the U.S. stronger or weaker? I think that if he is too impatient with the traditional institutions that we've talked about -- not only the alliances like NATO, but also the international institutions like the United Nations -- Trump may weaken the U.S. because American power has been partly magnified by a network of institutions and alliances.

On the other hand, if Trump succeeds in reviving the U.S. economy, increasing the growth rate significantly and challenging the assumptions of unfriendly powers, then he may actually succeed in making the position of the U.S. stronger.

The U.S. is on a course for relative decline already. Trump's people are going to try and halt and reverse America's relative decline. A lot is going to depend on how sophisticated his advisers can make his foreign policy. If you try and make foreign policy on the basis of the art of the deal, you are quickly going to discover that international relations is not like real estate.

Interviewed by Nikkei Washington Bureau Chief Hiroyuki Kotake

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